Prabhudas Lilladher`s research report on metal space.Today, the honourable Supreme Court of India in its hearing termed all the coal blocks allocations made based on the recommendations of Screening Committee as illegal and arbitrary. The court found that the guidelines followed by the screening committee have been inconsistent, unclear and most importantly, have not served the public interest at large. However, the Court would hear the consequences of the illegality of the coal blocks on coming 1st September. Our interaction with legal fraternity suggests that coal blocks would eventually be cancelled given the definition provided by the Court. Simultaneously, the Court would direct the Govt to organise the auctions for these blocks in time bound manner. Operational coal blocks would be allowed to operate by the existing allocatees till the auction takes place. Jindal steel and power, the worst affected player: JSPL’s entire 12mn tonnes of production come from mines allocated after 1993. Further, it will delay the process of securing mining rights for its much awaited Utkal B‐1 mine, critical for its Angul steel cum power project. Even though, we have not factored any production from Utkal B‐1 mine in FY16 but our TP was ascribed with valuation of Rs48/share for the block. Hindalco, the next in line: Hindalco’s Talabira‐I mine (allocated in 1994) supplies 2.5mtpa of coal to meet 1/3rd of its coal requirement. Further, it will raise structural issues on fuel security for its Green field 359ktpa smelter at Mahan which were allocated captive mine in JV with Essar power. However, our earnings don’t factor any contribution from this mine till FY17. Tata Steel, SAIL and JSW Steel least impacted: Our earnings estimates as well as valuations for Tata, SAIL and JSTL had not factored any contribution from any of their coal blocks given the slow pace of their clearances.
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